Convergence or divergence? The impact of common institutional ownership on firms’ innovation trajectories

Understanding how innovation trajectories are shaped is a central concern in innovation management research. This paper investigates whether common institutional ownership (CIO) drives convergence or divergence in the innovation trajectories of firms. Using a large sample of Chinese A-share listed firm-pairs from 2010 to 2022, we find that CIO significantly enhances innovation similarity among invested firms, highlighting the knowledge spillover effect in innovation governance. The results are robust across various model specifications and robustness checks. Further analysis reveals that CIO facilitates inter-firm patent collaboration and patent citation, and site visits play a positive moderating role, thereby fostering innovation convergence. We also find that intra-industry relationships and heterogeneous ownership structures amplify inter-firm knowledge flows, reinforcing the role of CIO in facilitating knowledge transfer. Overall, our study provides new insights into the governance effect of CIO, examining its role in inter-firm innovation behavior and advancing the understanding of innovation convergence at the micro level.